Source: Black Diamond

There are two broad categories of consumer stocks: consumer staples and consumer discretionary. Black Diamond (NASDAQ:BDE), a leading global designer and manufacturer of active outdoor performance products and apparel, falls into the latter category. This means that it is subject to the risks of changing consumer preferences and varying demand under different economic and even weather conditions. But Black Diamond sets itself apart from its peers with its focus on new product innovation and sufficient diversification.

New, newer, and newest
Consumers have a natural attraction toward new things, and this effect is further amplified in the outdoor equipment and lifestyle product category where outdoor enthusiasts such as skiers, hikers, and cyclists demand the newest and in-trend products. Black Diamond understands this aspect of customer needs very well.

Firstly, Black Diamond boasts 34 single product categories, with none of them representing more than 15% of its total revenues. As a result, it can capture demand shifts between the various outdoor and lifestyle categories. For example, if there is a sudden surge in interest for climbing and a corresponding drop in demand for skiing, Black Diamond is less vulnerable than others.

Secondly, Black Diamond has a good record of having redefined individual product categories with its marquee products. For example, its AvaLung backpack helps users trapped under snow survive an avalanche burial by increasing the amount of breathing time, and its FlickLock technology has made Black Diamond a pioneer in trekking poles with a single-handed locking mechanism enabled.

The results speak for themselves. Black Diamond has grown its revenues by an impressive 15% CAGR since 1989. Recent trends are equally good, with Black Diamond almost doubling its sales from $125 million in 2010 to $237 million in 2014. It also has introduced hundreds of new products in the past 15 years, with a majority of them backed by its portfolio of 100 patents and patents pending globally.

Cabela's (NYSE:CAB), a specialty retailer of prominent outdoor recreation brands in product categories such as fishing, hunting, camping, has similarly placed a strong emphasis on new product innovation. Recently, it introduced new specialized sets of outerwear for its Guidewear Outerwear Series to protect its customers against extreme weather conditions. They include Guidewear Bass Angler waterproof rain wear for bass anglers, and Guidewear Tidal-lightweight rain gear for saltwater anglers. This focus on new innovative products is reflected in Cabela's significant sales contribution from its own Cabela's branded products at 25% of its merchandise revenues.

Source: Black Diamond

Putting your eggs in different baskets
Unlike consumer staples food, beverages, and household items, consumers have a tendency to cut back on discretionary activities such as mountaineering, climbing and skiing when their country's economic condition worsens. Black Diamond has minimized its geographic risk by having globally diversified operations in as many as 50 countries worldwide. It generated close to 40% of its sales from countries outside the U.S., so that it is less affected by any single country's economic problems at any point in time.

Another risk specific to Black Diamond is that of weather conditions and seasonal effects. For example, demand for skiing products will definitely drop during the summer season. As a result, Black Diamond maintains a healthy balance between products for the fall/winter season and those for the spring/summer sports season.

Other companies in the leisure space like Vail Resorts (NYSE:MTN) have also sought to mitigate the seasonal impact of such products and services, albeit in a different way. Vail Resorts, a leading operator of ski resorts, has seen its annual season pass sales increase by a nine-year CAGR of 14% from $60 million in 2006 to over $150 million in 2014. These season pass holders currently account for about 35%-40% of Vail Resorts' top line, contributing a valuable recurring revenue stream to partially offset any fall in revenues outside the fall/winter season.

Foolish final thoughts
While most investors view consumer discretionary stocks as significantly more risky and volatile than their consumer staple peers, this isn't true for all of them. With its strategies of new product innovation and geographic and seasonal product diversification, Black Diamond has managed to minimize its risks with respect to changing consumer preferences and volatile economic and weather conditions. Moreover, near-term financial trends look positive, with Black Diamond registering record quarterly revenues of $60 million in the fourth quarter of 2013.

Mark Lin has no position in any stocks mentioned. The Motley Fool recommends Vail Resorts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.